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Meet Plaid Exchange, Your New Account Aggregation Management Service

Account and data aggregator Plaid made a name for itself by providing consumers and developers with account aggregation capabilities that are increasingly becoming tablestakes; now it wants to make sure that financial institutions are also well-served by those features. The financial services company, which bought wealth management-focused data aggregator Quovo last year and was valued at $5.3 billion in a pending deal with Visa, is launching Plaid Exchange.

Plaid Exchange as a product offers several features. It is part API-accelerator, supporting software buildouts for institutions that want to quickly bring open data options to market for their customers or other businesses. It is a bi-directional data exchange hub. It is also a means for institutions to offer a data access dashboard, where customers will be able to see which data exchange valves are open or closed—and make adjustments as needed.

Call it “open finance in a box,” said Niko Karvounis, head of product at the firm. “This is really about engaging with financial institutions for the benefit of [customers, developers and the institutions] so they can coexist and complement each other.”

In an indication of its aspirations, Plaid is drawing parallels between the development of Exchange and the early days of Amazon Web Services, or AWS, Amazon’s IT service management company, according to Plaid spokesperson Natalie Giannangeli. Just as Amazon helped businesses to quickly scale with its data services, financial institutions that want to quickly develop data access capabilities—and previously didn’t have the financial or technical resources to pull it off—can now do so using Plaid Exchange, she said.

"Plaid Exchange will make it easier for advisers to bring relevant client information together, securely, in one place—potentially reducing the time to insight and client value," said Jacob Morgan, senior analyst of digital business strategy at Forrester Research. The new platform should help smaller firms create their own data access points, "without needing the overhead of their own software studio and development shop," he added. "As with all platforms, success will require a strong network to make the proposition most effective."

With Plaid taking on the heavy lifting of building out data connectivity features at financial institutions, the data locked in those institutions should be accessible more quickly, easily and securely, added Karvounis. The coronavirus pandemic has only accelerated the trend toward clients and advisors demanding access to a complete financial picture.

Advisors and their clients know how frustrating it can be to find incomplete data or unreliable connections. Plaid’s latest enhancement is designed to alleviate those headaches.

As it rolls out, changes at Plaid Exchange could also reverberate into financial planning. That’s because the platform’s developers are queuing up better categorization of consumers’ transactions, adding a data layer on top of the pure movement of financial information.

Data aggregator MX also adds data layers to the underlying financial information it passes back and forth, which it says helps advisors “diversify [clients’] portfolio by cross-selling products that enhance their financial position, ultimately increasing loyalty and satisfaction.”

Plaid, however, stopped short of describing Plaid Exchange as a step towards an open finance data standard. “It’s still fairly early days in building out the open finance infrastructure,” said Karvounis. “It’s less about trying to establish a standard than it is about enabling adoption of open finance.”